China's northeastern rust belt, encompassing Liaoning, Jilin, and Heilongjiang provinces, is witnessing a significant exodus of multinational companies, including Panasonic, Toshiba, and Mazda. Once a thriving industrial hub, the region has suffered economic setbacks due to a variety of factors, including dominance by state-owned enterprises and rapid growth of the private sector in other parts of the country.
The economic outlook for the rust belt has become increasingly bleak. An unfinished skyscraper in Dalian stands as a symbol of this retreat, as Japanese developer Orix has decided to sell the property after halting construction.
Since its peak in 2019, the number of Japanese companies operating in Dalian has dropped by 8%. Manufacturers are shifting their operations to Southeast Asia in response to rising costs and slowing economic growth.
In stark contrast to the robust growth seen in eastern provinces, the regional GDP in the rust belt has only grown 7-8 times since 2000. This is far below the 10-17 times growth experienced in the eastern regions. Additionally, the population in the rust belt is aging rapidly as young people seek opportunities elsewhere.
Despite efforts by Beijing to promote revitalization in the region, structural challenges persist. The relatively small consumer market of 97 million in the rust belt cannot compare to metropolises like Shanghai.
Japan's foreign ministry reports a widespread contraction in business activities. Companies such as Teijin, Toto, BMW, and Intel have divested assets, reflecting a broader trend. As the national economy experiences a slowdown, almost half of Japanese firms are reducing their investments in China this year, with the rust belt particularly affected as industry giants scale back their presence.
While local incentives have attracted some new projects, the region continues to grapple with long-term economic decline. The unfinished Dalian skyscraper, halted since 2013, serves as a poignant symbol of the uncertainty surrounding the rust belt's future.
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